Alberta’s oil “blessing” has become a curse for the province and the entire country, and “what ails it won’t change if we build a dozen pipelines to tidewater,” writes ex-Finance Canada Assistant Deputy Minister Alan Freeman in an iPolitics opinion piece.
The problem, he says, is that oil is like any other commodity—and when prices fall, as they inevitably do, the highest-priced producers are hit hardest.
Freeman describes an economic scenario that applies to any oil-producing country, including Canada. “When oil prices are high, there’s so much money to be made in extracting it that other sectors of the economy tend to languish,” he writes. “Agriculture and manufacturing suffer because nobody can compete with the inflated wages in the resource sector. Government revenues are subject to booms and busts, driven by global commodity cycles completely beyond local political control.”
Construction of new projects in the Alberta tar sands/oil sands is bound to fall off at today’s oil prices, Freeman notes, and “if the world is truly getting serious about fighting climate change, the oilsands and its unfortunate carbon footprint are looking less and less viable.” But the bigger problem “is that while we were busy convincing ourselves that turning northern Alberta into a giant open-pit mine was the surest way to fortune, we forgot about the benefits of a diversified economy.”
The good news is that, with resource extraction accounting for only 10% of GDP in Quebec and 7% in Ontario, Canadians have “proof that our future is not solely dependent on a return to $100-per-barrel oil, which may never happen,” he writes.
“Already, we can see signs that lower oil prices, a devalued currency, and a stronger U.S. economy are pointing to a revival of manufacturing in central Canada. It won’t be as spectacular as the halcyon days in Fort McMurray, but what’s good for Ontario’s automotive factories and Quebec’s aerospace industry is actually good for us all—including Albertans.”